U.K. Data, Chair Powel's Speech In Focus

 | Jan 11, 2022 04:34AM ET

On Tuesday, investors had some comfort after the US stock markets rallied late in the day. Still, Asian equities and the dollar remained directionless as investors pared risky assets on expectations the US Federal Reserve could raise interest rates as early as March.

These expectations also boost the 10-year Treasury yield to a two-year high. Despite early short-term corrections, it appears the increase in long-dated Treasury yields will continue.

The rapid spread of the Omicron variant of Coronavirus is also weighing on markets as US hospitalizations due to COVID-19 hit a record high on Monday.

After the major averages continued to decline on Monday, US futures were flat overnight, apart from the NASDAQ, which ended its four-day slump.

h2 Dollar Edges Lower/h2

With the USD failing to rally even though US bond yields are rising relative to other G10 economies, many are wondering what will be required to push the currency higher.

For that reason, market participants are keenly waiting for inflation data due to be released Wednesday that could show core inflation at 5.4% - the highest figure in a decade.

The USD index trades in a falling pennant pattern between 96.48 and 95.55. Momentum oscillators reflect that bullish forces are fading.

The only hope is that USD remains above the 50-day and 200-day EMAs, which can give some time to buyers to regain momentum for further traction.